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Factbox: Verdict due in Italian banking trial
December 18, 2012 / 11:57 AM / in 5 years

Factbox: Verdict due in Italian banking trial

MILAN (Reuters) - An Italian court is expected to rule on Wednesday on whether four foreign banks missold derivatives to the city of Milan in a case seen as a litmus test for hundreds of local governments facing big losses from complex financial contracts.

Following are details about the case, the first criminal trial of this kind in Italy.

* Deutsche Bank (DBKGn.DE), JP Morgan (JPM.N), UBS UBSN.VX and Depfa Bank have been charged with aggravated fraud and accused of making up to 100 million euros ($132 million) in illicit profits from the sale of an interest-rate swap on a bond issued by the city of Milan in 2005. The banks, which also face possible fines of 1.5 million euros each and an order to pay back 72 million euros, deny any wrongdoing.

* Thirteen people - 11 bank employees and two former Milan city employees, are on trial. Prosecutor Alfredo Robledo has requested jail terms of up to 12 months for nine bankers, and the acquittal of four people.

* The case stems from an interest-rate swap contract on a 1.68 billion euro, 30-year bond the city of Milan issued in 2005. The derivatives contract swapped a fixed rate of interest on the bond for a variable rate and had a “collar” agreement which protected the city of Milan if rates rose but also meant it would lose money if they fell below a certain limit.

* Earlier this year, Milan and the four banks reached a deal under which the interest rate swap contract was canceled and the city council pocketed 455 million euros, agreeing in turn to drop a civil suit. That has no bearing on the criminal trial.

Reporting By Silvia Aloisi; Editing by Erica Billingham

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